January 23, 2009

Expected losses in outside and neighboring markets should drag down U.S. wheat futures at the start of Friday's day session.

 

Chicago Board of Trade March wheat is called to open 4 to 8 cents per bushel lower. In overnight electronic trading, CBOT March wheat slipped 6 cents to US$5.60 3/4.

 

The markets should come under pressure from weakness in crude oil, equities, CBOT corn and soybeans, analysts said. Wheat is a follower that is "taking direction from outside influences," according to a note from Country Hedging.

 

"Outside markets remain weak, which could pull prices lower, unless bullish fundamentals emerge," Farm Futures analyst Bryce Knorr said.

 

Weekly U.S. wheat export sales of 413,300 tonnes were within trade expectations, which ranged from 200,000 to 500,000 tonnes. Of the total, 410,300 tonnes were for delivery in the 2008-09 marketing year, according to the U.S. Department of Agriculture.

 

There is some optimism about improving demand for U.S. wheat following a rise in Black Sea prices. The USDA noted 2008-09 sales for the week ended Jan. 16 were "up noticeably from the previous week and double the prior four-week average."

 

The U.S. is now seen as more competitive for world export business after a time in which the Black Sea region dominated sales to foreign countries like Egypt, traders said. Egypt's state-owned wheat buyer, the General Authority for Supply Commodities, said Wednesday it bought 178,000 metric tonnes of Russian, French and U.S. soft red winter wheat in a tender, on a free on board basis.

 

It is "important to point out the significance of advancing Black Sea FOB prices," AgResource Co. said in a market comment. "This obviously is supportive to U.S. exports, but it should be noted that competition in all classes from all exporting countries will increase, particularly in Europe."

 

Weekly sales of SRW wheat, traded at the CBOT, remained week. A breakdown of the weekly sales by class showed SRW wheat sales of 4,600 tonnes and hard red winter wheat sales of 158,900 tonnes.

 

"The sales report will be important in the next month as the U.S. marketplace regains export competitiveness," AgResource said.

 

CBOT March wheat on Thursday closed weaker and near the session low. Outside markets were mostly bearish Thursday, as crude oil and the stock indexes were weaker.

 

The next downside price objective for the bears is pushing and closing CBOT March wheat below solid technical support at US$5.25, the analyst said. The next upside price objective for bulls is to push and close the contract above solid technical resistance at US$6.00, he said.

 

First resistance is seen at Thursday's high of US$5.80 1/2 and then at this week's high of US$5.88 3/4. First support lies at Thursday's low of US$5.60 and then at this week's low of US$5.48 1/4.

 

Looking at the weather, colder weather is returning to the U.S. Plains for the weekend, according to a forecast from DTN Meteorlogix. It does not look cold enough to harm dormant HRW wheat, the private weather firm said.

 

Dryness is of "increasing concern" through the Plains' southern and west-central crop areas, and there is little precipitation expected in the areas during the next 10 days, Meteorlogix said. However, spring rains will still make or break the crop, analysts have said.